BT Pension Scheme seals deal for 13pc stake in Thames Water

The BT Pension Scheme has become the second-largest shareholder in Thames
Water as it looks to invest in an asset that will provide safe and
sustainable returns to match the fund's long-term liabilities.

The scheme (BTPS) bought a 13pc stake in Kemble, the Thames Water holding company, from funds managed by Macquarie, the Australian investment bank and infrastructure investor.

Yesterday, BTPS said its "long-term liabilities to its pensioners are linked to UK inflation". Therefore the pension scheme is "seeking to increase its exposure to domestic infrastructure investments that have a natural linkage to UK inflation".

The deal comes after The Sunday Telegraph revealed in late March that Macquarie was auctioning a stake in Thames Water.

Both Macquarie and Hermes GPE, the fund manager that advises BTPS on its investments, refused to comment on how much the 13pc stake in Thames Water was sold for but analysts have speculated in the past that an 8.7pc stake in the utility might be worth between £500m and £700m.

BTPS, the UK's largest corporate pension scheme, has £38bn of assets, 325,000 members and makes annual pension payments of around £2bn.

Frank Naylor, Head of Strategy for BTPS Management, said: "Thames Water is a well established business governed by a mature, transparent regulatory regime that should provide predictable inflation-linked cash flows over the long term."

The acquisition of the 13pc stake will give BTPS's representatives at Hermes GPE a seat on the board of Thames Water. The deal makes BTPS the first British pension fund to invest in Thames Water since Macquarie bought the utility for £8bn in 2006.

Last year, funds managed by Macquarie sold a 9.9pc shareholding in Thames Water to the Abu Dhabi Investment Authority.

And earlier this year, the China Investment Corporation (CIC) bought an 8.7pc stake in Britain's largest water company from Santander Private Equity, part of Spanish banking group Santander's asset management arm, and Finpro, a Portuguese investment vehicle.

Macquarie, though, will still remain the largest shareholder as its fund owns 26pc.

The other shareholders in Thames Water include a wide range of pension funds from across the world, including from Canada, Australia and the Netherlands.